Just as the businesses and economies have cycles, capital projects (particularly engineering and construction) have recurring cycles. The pendulum swings back and forth within the bounds of the capital project cycle. In capital projects, the cycle can be three to five years, depending on the economy, size and complexity of the projects and other factors.
At this time, the market seems to be transitioning from project planning and early execution into middle to later-stage execution with emergence of disputes. As the claims and disputes marketplace intensifies over the next several years, Construction Claims and Disputes will become an increasingly commonplace and a relevant topic for capital project management professionals.
Construction Claims and Disputes continues to be the most popular subject on Project Professionals. Further, it is the most requested line of services provided by McLaughlin & McLaughlin. M&M are project management practitioners (in the field) and, yes, we practice what we preach. Further, our choice of topics for Project Professionals posts is driven by and reflective of practical and current issues. This is not esoteric, academic or hypothetical “stuff”.
This summary update provides readers with an overview of prior posts and provides a baseline for future posts that will follow on a timely basis. Initially, this Subject Series, Construction Claims and Disputes, was posted during January 2011 through July 2014. During the past several years, greater than 25% of views by visitors have been to this Subject Series.
Ideally this Subject Series provides a starting point to investigate best practice on many planning and execution features of construction claims and disputes.
Construction Claims and Disputes (Part 0) – This introduction formats the discussion with definitions, claim categories and key industry references. This post is consistent with M&M experience in many years of professional services.
The Overview (Part 1) –Part 1 updates Part 0, the introduction.
Construction Claims Management Planning (Part 2) – This is the most popular post in this (most popular) Subject Series. Construction claims (or the risk of claims) can and should be professionally managed. View this process as a piece of project (execution) planning [link]. This post outlines elements of a Construction Claims Management Plan. Further, it addresses elements of defining a Claim Strategy. Stakeholders include Owners, Prime Contractors and Subcontractors. Do not miss this post.
Current Project Professionals Posts (Part 3) – Claims are organized into four general categories. These categories are consistent with the frequency of occurrence, methods of management and other key managerial considerations. The categories are
- Scope of Work, Changed Work or Variations
- Delay and Acceleration, Time-Related
- Disruption / Productivity (usually labor/labour)
- Terms and Conditions.
Pricing Construction Claims (Part 4) – This post addresses the pricing of claims and disputes. The compulsion or question is – “How much is a potential claim worth?” Do you think you know how to price your (or other’s) claims? Andrew (Andy) Ness, 2012-13 Chair, ABA Forum on the Construction Industry probably disagrees with your answer. Read this post and consider Andy’s position as well as other considerations regarding claim pricing/damages. The content of the recent ABA book on the subject is covered.
Pricing Construction Claims (continued) – Are construction claims and disputes “all about the money?” Some believe this to be the case. This post (Part 5) expands on Part 4 by addressing pricing and citing additional references.
Scope of Work – Baseline (Part 6) – It is widely believed and accepted that Scope of Work and/or Changed Work is the single largest source of claims and disputes in engineering and construction (as well as many other contracted services). In order to establish departures from the baseline scope of work, you must be able to define the applicable baseline. This post cites various sources for baseline definition,
Scope of Work – Plans and Specifications (Part 7) – Several industry sources (publications) are used to elaborate on execution and contracting strategies that rely on plans and specifications as a major component of scope or work definition. This discussion includes typical contract documents and contract provisions wherein scope of work, services, supply and / or facilities is / are defined. Suggestions for configuration and change management in the field are included.
Scope of Work – Impacts (Part 8) – Claims and disputes regarding scope of work are a widespread problem and represent the most common issue. Perhaps 75 to 90% of all engineering and construction claims and disputes involve contract scope of work. Direct compensation for a scope of work change may merely be the proverbial “tip of the iceberg.” What about the rest of the story? Is the contractor missing many other costs or schedule impacts? Often, this is the case. This issue may be broader that an added piece of equipment, redesign to avoid a conflict or similar events.
Why Scope of Work (Part 9) – Scope of work influences and is a foundation for delay, acceleration, disruption, payment and many other types of disputes. Consequently, virtually all claims (should) start with scope of work. Scope of work is a huge factor in capital investments. In the engineering and construction market, investments total in the hundreds of billions of dollars (USD). These investments are increasing, particularly in areas such as the US Gulf Coast. Typical budgets for changed work are targeted for 10% which makes this market of tens of billions of dollars (USD). However, this is merely the budget, not the reality.
Turnkey Contract Scope of Work – (Case Study 01) – M&M developed this Case Study for the American Association of Cost Engineers (AACE) International annual meeting (June 15, 2014) in New Orleans. The specific presentation was Claims Avoidance through Effective Cost Engineering. This panel discussion was part of the Energy Industry Track. This particular Case Study in Construction Claims and Disputes focuses on claims in (lump sum) Turnkey contracts. Further, it focuses on Scope of Work. The vast majority of construction claims and disputes have their origins in Scope of Work.
Hence, this is a logical starting point and has the widest application. The Case Study 01 is presented in a video using PowerPoint with animation and voice over. This format is used for ease of review and presentation.
Other Subject Series that are both relevant and popular include:
- Managing Risk of Delay [16 posts]
- Contract Notice and Recognition [4 posts]
- Productivity [18 posts]
- Ways of Working [7 posts]
- Time Management – Schedule Specification Implementation [6 posts]
Going forward, we will post other features of CONSTRUCTION CLAIMS and DISPUTES.
My we wish you the best of luck and let us all attempt to confront and deal with these and other project management challenges. It is crucial that recognition and anticipation of these issues occur during initiation and planning. However, the recognition and management should continue through execution, controlling and closeout.
Please note that McLaughlin and McLaughlin [M&M] is not a law firm and is not intending to provide legal advice. M&M is a consulting firm providing (among other services) non-legal expertise in dispute resolution and litigation support. The Resource Center is for the convenience of blog visitors and M&M does not offer this for commercial purposes. For further information on M&M services, please see www.McLaughlinandMcLaughlin.com.